Budget resolves some fiscal woes with spending fights ahead

By Derek Wallbank and Heidi Przybyla, Bloomberg News

Saturday, December 28, 2013

WASHINGTON — Lawmakers promised their budget deal would mark an end to Washington’s cycle of fiscal showdowns.

There’s one step left: writing an encyclopedic spending bill funding every agency in the government, even the ones they don’t like. Congress has less than a month to do it before a Jan. 15 deadline, one final test of whether bipartisanship will last when Democrats and Republicans get to the fine print.

“The Congress has been dysfunctional,” said Scott Lilly, a former staff director of the House Appropriations Committee. “I’m not sure that applies to the appropriations committees. It may. This is going to be a test to find out.”

That’s particularly true in 2014, a midterm election year. Many of those spending provisions, from funding the Environmental Protection Agency’s regulatory oversight to cutting defense spending that could cost local jobs, will be ripe for attack ads from House and Senate primary challengers.

“It’s probably too early to declare an outbreak of bipartisanship,” President Barack Obama said in a Dec. 20 press conference. “But it’s also fair to say that we’re not condemned to endless gridlock.”

Lawmakers, whose disputes led to the first government shutdown in 17 years in October, will “put together bills that can reflect the best we can do under the circumstances,” said Murray. Chairman of the Senate Budget Committee, Murray also leads the appropriations panel that controls spending on roads, bridges and affordable housing programs.

The goal is to allocate funds for the entire federal government by Jan. 6, when Congress returns after a holiday break. The measure has to be passed and signed into law by Jan. 15 to avert a second government shutdown in four months.

“The biggest challenge is probably just time,” said Keith Kennedy, a former Senate Appropriations Committee staff director. Appropriators will work on 12 separate bills directing funds to federal agencies and programs.

Former senior appropriations aides such as Lilly cited bills funding the Labor and Health and Human Services Departments, and the Interior Department and EPA as the most likely to upset the bill-writing process.

Among the greatest challenges will be resolving funding for implementing Obama’s health-care law. A number of Republicans plan to oppose any funds for the 2010 Affordable Care Act, said a House aide who spoke on condition of anonymity.

Even so, Sen. Rob Portman said in a Dec. 20 interview on Bloomberg Television’s “Political Capital with Al Hunt” that he’s “very optimistic” lawmakers will succeed.

“I’m sure it’ll come up as an issue again,” the Ohio Republican said of the Obamacare funding. “But I don’t think it’ll derail the appropriations process.”

The Labor and Health bill covers about 30 percent of U.S. discretionary spending and includes about 50 percent of the most contentious issues, said Lilly, currently a senior fellow at the Center for American Progress, a Washington policy research group aligned with Democrats. In addition to much of the Affordable Care Act, these include money for family planning, which Republicans often oppose, as well as workplace health and safety programs. The National Labor Relations Board is also funded through the same bill.

The Republican chairman of the House Labor and Health subcommittee, Jack Kingston, is running for an open Senate seat in Georgia next year. He’s positioning himself as the most conservative candidate in a primary likely to include at least six candidates, including other House members.

If Kingston balks at some of the funding line items, Appropriations Committee Chairman Hal Rogers, R-Ky., and Maryland Democratic Sen. Barbara Mikulski, his Senate counterpart, may have to work around him, said Lilly. “Kingston’s been telling people he didn’t think they could do a bill,” he said.

House Republicans had also planned to slice funding to the Internal Revenue Service by $2.8 billion, a 24 percent reduction, as a way of blocking implementation of the health- care law. The IRS oversees tax provisions in the 2010 law.

That cut could have reduced spending to top IRS contractors Accenture and IBM Corp., according to Bloomberg Industries analysts Melissa Avstreih and Brian Friel.

Rogers has said some policy riders, though not all those Republicans wanted, will have to be included in the final bill.

The provisions cover such items as barring government employees from flying first class using taxpayer funds, to blocking horse slaughter for domestic consumption by defunding USDA from doing the needed meat inspections.

The riders often are controversial. The House’s draft EPA funding bill, which never got a floor vote, would have blocked EPA from implementing regulations on greenhouse gas emissions, as well as a stream buffer rule opposed by coal companies Arch Coal and Peabody Energy.

The abbreviated timeline will spark a lobbying race among defense contractors to insulate themselves from cuts in spending that will fall $26.6 billion less than the White House’s base defense request, according to Bloomberg Government analysts Cameron Leuthy and Robert Litan.

“Congress simply hasn’t had to make politically painful choices in defense spending on this scale recently,” Leuthy and Litan wrote.

The cuts, while less than the automatic, across-the-board reductions called sequestration that would have occurred without the budget deal, may be trickier to make because lawmakers will have to hash them out line-by-line.

Dick Durbin, D-Ill., chairman of the Senate’s Defense Appropriations subcommittee, said he’s working off a three-page memo of “substantive issues” that have to be resolved. He declined to elaborate, though a review of both House and Senate spending bills shows some examples.

General Dynamics’ Virginia-class submarines faced an 8.8 percent cut under the Senate’s original spending plan. The House wanted to spend almost 21 percent more. The Senate wanted to cut Boeing’s ballistic missile defense program based in California and Alaska by about 9 percent, the House would increase spending by 13 percent.

In their Commerce, Justice and Science spending bills, the House and Senate were also $1.4 billion apart on their plans for NASA, which is heavily reliant on vendors like Boeing, Lockheed Martin and Jacobs Engineering.

“There is now a one-month race as the Pentagon and Congress recalibrate national security priorities within a limit of about 5 percent less than the department’s request,” Leuthy and Litan wrote. “Defense contractors have that same tight window in which to influence the outcome.”

Lockheed, Boeing and Northrop Grumman are three of the five largest federal contractors for 2012 according to data compiled by Bloomberg. The three companies have each already spent between $11.1 million and $13.2 million lobbying so far in 2013, according to disclosures compiled by the Center for Responsive Politics.

Lawmakers and analysts have expressed optimism that appropriators will come to an agreement in time to avert another shutdown.

“The worst thing would be that it all falls apart” and the government returns to a series of stopgap spending bills, said Kennedy. “I do not think that will happen,” he said. “They’ll get it done.”